Gold futures are inching higher on Tuesday after an earlier rally to a new multi-month high fizzled due to the lack of buyers. The move was offset by an uptick in the U.S. Dollar against a basket of currencies after a weaker opening. Treasury yields are also firming after touching a two-week low last week. The price action suggests trader indecision as players await the next catalyst.
At 12:28 GMT, August Comex gold is trading $1913.10, up $7.80 or +0.42%.
Gold posted its biggest monthly jump in May since July 2020, as the U.S. Dollar headed for a second month of decline and U.S. Treasury yields retreated from highs set earlier in the year on inflation concerns.
Reuters is saying growing inflationary pressures are lifting the bullion’s appeal, which doesn’t make sense given the stable Treasury yields and rising stock prices. If there were inflationary pressures, I think yields would be higher and stocks would be steady to lower.
Federal Reserve policymakers are saying that the jump in inflation will be temporary. If that’s the case then speculators could be driving gold prices higher because they believe the Fed is wrong. That narrative is going to take some time to develop so if buyer conviction is strong enough then gold should remain underpinned over the near-term or until the market sees economic numbers to the contrary.
Treasury Yields Climb as Investors Digest Higher Inflation Prints
Bonds yields rose on Tuesday, as investors digested last week’s inflation data and look ahead to this Friday’s all-important jobs report.
The yield on the benchmark 10-year Treasury note ticked up to 1.62% earlier today, while the yield on the 30-year Treasury bond rose to 2.301%.
Inflation is even more in focus since the release of April’s core personal consumption expenditures price index last week, a key measure of inflation, which rose 3.1% – hotter than expected.
Today, investors will get the opportunity to react to ISM manufacturing new orders, prices and employment for May as well as May’s Dallas Fed Manufacturing Index. All of the reports are expected to confirm the current economic recovery.
Federal Reserve Governor Lael Brainard will be delivering a speech on economic and monetary policy outlook in a webinar for the Economic Club of New York at 18:00 GMT.
Looking ahead, investors are also eyeing Friday’s jobs report. Economists expect the data to show the creation of around 674,000 jobs in the month of May, after April’s read came in below expectations at 266,000.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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